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Newbie to Ltd contracting - if you have salary at under £12k you are more likely to..

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  • northernladuk
    replied
    Originally posted by TheFaQQer View Post
    Is there any evidence that it makes any difference? If HMRC look at the levels of company income and dividends then that's where the cases will come from, not paying an extra £1k or £2k in salary and paying a smidgen of tax.

    Is the salary that you pay yourself anywhere close to the market rate for a permanent employee doing the same kind of work? If it isn't, then I can't see how paying that little bit of tax is meant to keep HMRC at bay - if anything, it sounds like you deliberately chose a salary level to try to keep HMRC away, which may open up other questions.
    Nope and the guy I spoke to at SJD was clear on that. He just mentioned if HMRC want to target any particular group in the future everyone under the threshold would be a fairly identifiable group. I mentioned a few K more is hardly a defence which he agreed and said it was up to me. It was just his advice which I chose to accept. I know at least two other people with SJD who didn't take up the advice.

    Leave a comment:


  • TheFaQQer
    replied
    Originally posted by northernladuk View Post
    To be fair SJD also advised me to pay a little tax. They admitted there isn't strong evidence for it but if anything changes i.e. HMRC start looking at people under the threshold you're covered so am happy to go with it. I understand there risk levels are pretty damn low but still, sounds like good advice to me.

    EDIT : From an HMRC investigation I mean. I dunno why IR35 is factoring in the this thread to be fair.
    Is there any evidence that it makes any difference? If HMRC look at the levels of company income and dividends then that's where the cases will come from, not paying an extra £1k or £2k in salary and paying a smidgen of tax.

    Is the salary that you pay yourself anywhere close to the market rate for a permanent employee doing the same kind of work? If it isn't, then I can't see how paying that little bit of tax is meant to keep HMRC at bay - if anything, it sounds like you deliberately chose a salary level to try to keep HMRC away, which may open up other questions.

    Leave a comment:


  • northernladuk
    replied
    Originally posted by TheFaQQer View Post
    Based on what evidence? There is none that I've seen - sounds like it's from someone who doesn't understand IR35.
    To be fair SJD also advised me to pay a little tax. They admitted there isn't strong evidence for it but if anything changes i.e. HMRC start looking at people under the threshold you're covered so am happy to go with it. I understand there risk levels are pretty damn low but still, sounds like good advice to me.

    EDIT : From an HMRC investigation I mean. I dunno why IR35 is factoring in the this thread to be fair.

    Leave a comment:


  • TheFaQQer
    replied
    Originally posted by boulderman View Post
    ..be investigated...as it is this type of company that is trying to beat IR35.

    As many (from research on here) opt for minimum way or maybe the optimum £10,000 (for maximum tax savings) this could be a backward approach due to the risk of IR35 costs.
    Since you've been contracting for nine years, isn't it a little late to be asking this kind of question? What does your current accountant recommend and why?

    Leave a comment:


  • speling bee
    replied
    Presumably £12,001 p.a. would be the highest risk because it looks like you've got something to hide.

    Leave a comment:


  • TheFaQQer
    replied
    Originally posted by boulderman View Post
    Newbie to Ltd contracting - if you have salary at under £12k you are more likely to..

    ..be investigated...as it is this type of company that is trying to beat IR35.
    Source? Basis of fact?

    sounds like a load of bollocks from someone who doesn't understand IR35 to me.

    Originally posted by boulderman View Post
    As many (from research on here) opt for minimum way or maybe the optimum £10,000 (for maximum tax savings) this could be a backward approach due to the risk of IR35 costs.
    Which are £0 if you have insurance and / or PCG membership.

    Originally posted by boulderman View Post
    An accountant mentioned £12-13k reduces your noticability
    Based on what evidence? There is none that I've seen - sounds like it's from someone who doesn't understand IR35.

    Originally posted by boulderman View Post
    and my friend has his accountant opt for £16-20k salary as the tax on the extra isn't "major" (he's been on £450 a day for a decade so he can afford it).
    Good for him. I'd question why someone would volunteer to pay more tax, and if so why only that piddling amount, but if that's what he chooses to do then bully for him.

    Originally posted by boulderman View Post
    My question is:

    Is £12,000 optimum in terms of low tax (20% on the £2,000 [above the £10,000 tax free threshold]) and low risk from IR35 (my contract is via an agency who said I wouldn't be at risk going via them).
    No, as your salary level is irrelevant, really. Unless you are getting paid somewhere close to the market rate, then there is still money to be had by HMRC if they found you inside. Trying to say "oh, my salary isn't an illusion - look, I pay myself £12k rather than £10k or £6k" isn't going to make any difference.

    What did the professionals say when you had the contract and working practices reviewed, or did you just trust that the agent knows exactly how you work with respect to IR35?

    Originally posted by boulderman View Post
    Quarterly dividends apparently draw the least attention from the tax man too.
    No basis of fact for that statement.

    Originally posted by boulderman View Post
    My plan was going to be:

    £12,000 Annual Salary
    ~£7,905 Expenses (extra rent @£5pd, food @£10pd, 10,000 miles) Assuming 227 working days a year

    Of reminder of my rate, *.8 to leave corporation tax and then pay the remainder of what is left quarterly to me (however I've heard you should leave say 30% in the business bank account so was going to do this?)

    Thanks for any help on any points.
    Sounds like some poor sums in there as far as I am concerned.

    Leave a comment:


  • tractor
    replied
    ...

    Originally posted by boulderman View Post
    ..be investigated...as it is this type of company that is trying to beat IR35.

    As many (from research on here) opt for minimum way or maybe the optimum £10,000 (for maximum tax savings) this could be a backward approach due to the risk of IR35 costs.

    An accountant mentioned £12-13k reduces your noticability and my friend has his accountant opt for £16-20k salary as the tax on the extra isn't "major" (he's been on £450 a day for a decade so he can afford it).

    My question is:

    Is £12,000 optimum in terms of low tax (20% on the £2,000 [above the £10,000 tax free threshold])
    and low risk from IR35 (my contract is via an agency who said I wouldn't be at risk going via them).

    Quarterly dividends apparently draw the least attention from the tax man too.
    My plan was going to be:

    £12,000 Annual Salary
    ~£7,905 Expenses (extra rent @£5pd, food @£10pd, 10,000 miles) Assuming 227 working days a year

    Of reminder of my rate, *.8 to leave corporation tax and then pay the remainder of what is left quarterly to me (however I've heard you should leave say 30% in the business bank account so was going to do this?)

    Thanks for any help on any points.
    Are you asking us which of the unsubstantiated rumours that you have heard are true? Something so serious you would take the advice of unqualified (mostly ) internet strangers??? Before you all start, there is no qualification in IR35 and as there is so little case law, it is difficult to quote precedent especially hving not seen the contract. Additionally in terms of what HMRC use as pointers, what they tell us and what they tell the HoL are likely to be as truthful as a corruption free MPS.

    Never believe what an agent says without checking it out. The validity of their claim is more or less entirely dependant upon a sensible contract that protects both parties, addresses the 3 pillars of IR35 and that your working conditions mirror that contract.

    Oh and WCS.

    Leave a comment:


  • Clare@InTouch
    replied
    I'm afraid your agency do not understand IR35 if they say you will be free of risk by going with them. Your IR35 status is determined by what you do on a daily basis for your client in terms of Control, requirement for Personal Service and Mutuality of Obligation. A good contract is worth nothing if it doesn't match what actually happens.

    HMRC have no visibility on how often you pay dividends unless they investigate as they simply see a single figure on your tax return. Provided you have dividend vouchers and you've made an effort to separate the transfers from salary and expenses then I see no issue at all with paying as often as you like. Most people pay monthly for cashflow reasons.

    There is no evidence I'm aware of to show that a salary of £12,000 will lead to an investigation, I've certainly not seen one that had any direct connection to the level of pay (although £12,000 is in line with national minimum wage, so could, in theory, be seen as more commercially realistic than the bare minimum NI level salary). Paying an extra £3,000 a year would not offer any greater protection either in my view. Anyway, if you're outside IR35 it doesn't matter as you can take what you like. You're much more likely to get an investigation if you file returns late or pay taxes late.

    £10,000 is more tax efficient this year due to it being in line with the personal allowance. Then take dividends up to the higher rate limit and leave the rest in the company. Dividends in higher rates are taxed at 25% whereas you can get the tax rate down to 10% if you take a longer term view and save the funds to withdraw them when you finally close the company down.

    In terms of expenses, avoid claiming a flat rate unless you have a dispensation from HMRC. Base your claims of what you actually spend, or what it costs you, and keep receipts for 7 years.

    Leave a comment:


  • Newbie to Ltd contracting - if you have salary at under £12k you are more likely to..

    ..be investigated...as it is this type of company that is trying to beat IR35.

    As many (from research on here) opt for minimum way or maybe the optimum £10,000 (for maximum tax savings) this could be a backward approach due to the risk of IR35 costs.

    An accountant mentioned £12-13k reduces your noticability and my friend has his accountant opt for £16-20k salary as the tax on the extra isn't "major" (he's been on £450 a day for a decade so he can afford it).

    My question is:

    Is £12,000 optimum in terms of low tax (20% on the £2,000 [above the £10,000 tax free threshold])
    and low risk from IR35 (my contract is via an agency who said I wouldn't be at risk going via them).

    Quarterly dividends apparently draw the least attention from the tax man too.
    My plan was going to be:

    £12,000 Annual Salary
    ~£7,905 Expenses (extra rent @£5pd, food @£10pd, 10,000 miles) Assuming 227 working days a year

    Of reminder of my rate, *.8 to leave corporation tax and then pay the remainder of what is left quarterly to me (however I've heard you should leave say 30% in the business bank account so was going to do this?)

    Thanks for any help on any points.

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